Tire companies accelerating electrification transformation

In recent years, tire companies have generally been under pressure due to factors such as rising raw material prices and weakening demand. Recently, Shen Jinrong, Senior Vice President of the China Association of Industry, stated at the 2023 China Rubber Annual Conference that the cyclical fluctuations in the global tire market have entered a downward range. However, the sudden rise of a new force has brought new opportunities to the industry.
According to data from the China Rubber Industry Association, China's tire industry experienced unprecedented difficulties and challenges in 2022. The national tire production is about 667 million pieces, a year-on-year decrease of 4.3%. The total domestic comprehensive production of outer tires by 38 key domestic tire enterprises was 468 million, a year-on-year decrease of 7.88%. Last year, as a major tire province, Shandong shut down 11 tire production enterprises and withdrew from backward and inefficient production capacity of 19.8 million tires.
In response to industry competition and declining profitability, tire companies have increased their research and production of electric vehicle tires to improve profits. Hantai Tire has launched its first product series, iON, specifically designed for electric vehicles. Pirelli has previously jointly launched new energy vehicle specific tires with LucidMotors, which can withstand an additional 6% to 9% of the weight compared to traditional products; Bridgestone has developed the Tyrant T005EV for new energy vehicles and plans to sell 90% of its automotive tires exclusively for electric vehicles by 2030.
In order to comply with the new trend of electrification and intelligence development in the global automotive market, Jinhu Tire has established eight production factories and five research and development centers covering major consumer markets worldwide. Its products cover multiple categories such as sedan tires, commercial vehicle tires, off-road vehicle tires, truck tires, and high-tech tires.
The first quarter performance of 2023 released by Jinhu Tire shows that sales reached 998.9 billion won, a year-on-year increase of 35.2%, and operating profit was 54.5 billion won, with a profit margin of 5.5%, an increase of 5.4% compared to the same period last year. The growth in performance is partly due to the rise in global tire prices and the optimization of supply chain efficiency. On the other hand, it is achieved by expanding the supply of new vehicle (OE) products, selling high-yield products in the global market, expanding market share, and increasing product sales prices. In addition, electric vehicle products have gradually become a new growth point for Jinhu tire performance.
We have launched new products for electric vehicles to increase sales and operating profits by improving the structure, "said a person related to Jinhu Tire recently.
It is worth mentioning that the wave of automobile electrification has stimulated the market demand for specialized tires, while also posing new challenges to tire production enterprises. The industry believes that compared to traditional cars, the three electric system of electric vehicles has replaced the engine, with characteristics such as high torque and low noise. Electric vehicles have higher requirements for tire load-bearing performance, safety, comfort, economy, grip, noise, handling, wear resistance, and other indicators.
According to the research report, tires, as one of the important components of automobiles, are not only related to the front-end accessory market determined by automobile production and sales, but also closely related to the replacement retail market determined by automobile ownership. From the perspective of the work order structure of new energy vehicle maintenance business, the proportion of tire work orders for new energy vehicles is higher than that of traditional fuel vehicles. Therefore, new energy tire production enterprises with high-tech, large market, and good channels are expected to benefit from the wave of automobile electrification.